Stock Prices Recover From Morning Selloff
Stocks moved higher as a fallback in oil prices and a recovery in financial shares helped reverse an earlier decline.
Stocks opened lower as investors looked with hestiation on what might come from the first day of the two-day Federal Reserve interest-rate meeting and package company UPS warned that high fuel prices would send second-quarter earnings below expecations.
Just before the bell, the Case-Shiller home price index showed that US home prices extended their record slide in April. After the market opened, the Conference Board said consumer confidence fell to a 16-year low in June.
Both reports sent stocks lower before they recovered around midday.
In a busy morning for energy-related news, United Parcel Service warned that second-quarter earnings would be below expectations, blaming high fuel prices and a sluggish U.S. economy, and its shares fell.
At the same time, Dow Chemical announced its second price increase within a month that it said was caused by surging energy prices. The price increase amounts to as much as 25 percent in certain areas and includes transportation surcharges. Company shares gained 1.5 percent in premarket trading.
Shares of financials recovered after Monday's drubbing. Lehman Brothers, which fell 5.8 percent Monday, soared.
Citigroup, which announced it was cutting 10 percent of the workforce in its investment bank division, also rose sharply. And Washington Mutual was down 2.5 percent after Lehman slashed its price target for the savings and loan from $27.25 to $10, recovered as well.
Most economists expect the Fed to talk tough on inflation but keep the rates on hold due to the weakened economy when the announcement arrives Wednesday.
The Fed's job to fight higher prices will be made more difficult by evidence that job losses, so far largely contained in the financial and housing sectors, are likely to spread to other areas of the economy, depressing consumption even further.
"I think we have to see the Fed just stay on hold, even though a rate increase has been priced in by the end of the year," Kevin Sullivan, portfolio manager at Clariden Leu, told "Worldwide Exchange."
Meanwhile, supermarket chain Kroger reported a profit that beat expectations as the company used lower prices and gasoline discounts to help lure customers.
And stock-exchange consolidation continued, with NYSE-Euronext buying 25 percent in Qatar's Doha Securities Market to get access to the fast-growing Middle East. The Qatari state will keep the remaining 75 percent stake of the exchange.